Escorts Ltd bets on agri-business division to drive overall performance this fiscal

NEW DELHI: Farm equipment and engineering major Escorts Ltd expects to do comparatively better this fiscal than last year, driven by its agri-business division despite the impact of the coronavirus pandemic, according to a senior company official.

With strong demand for tractors continuing from rural markets, the company is optimistic that in spite of the supply-side constraints witnessed in the first quarter of this fiscal, it would be able to catch up in the remaining months to post better than industry sales, which is expected to rise by single digit.

"With all verticals put together, driven by agri division which is almost 80 per cent of the topline, overall we should be better than last year...Overall our expectation is that it will be a positive year, may not be the best year but it will be better than last year definitely," Escorts Ltd Group CFO Bharat Madan told PTI.

In the first quarter of the fiscal, he said despite the supply-side constraints due to lockdown the company was able to enhance its market share in the tractor segment. Escorts Ltd had sold 18,150 tractors in the quarter ended June 30 as against 21,051 tractors in the corresponding period last fiscal.

In July the company restricted production to around 60-65 per cent of capacity impacted by localised lockdown and COVID-19 cases in suppliers and at its factory, after reaching 90-95 per cent capacity in June.

The company's total tractor sales in July grew by 9.5 per cent at 5,322 units as against 4,860 per cent in the same month last year. Domestic sales were at 4,953 units as against 4,505 units in the year-ago month, up 9.9 per cent.

"Hopefully by August things will become normal and lockdown areas are also opened," Madan said adding, "we expect production to come back and we should be able to catch up. We should be able to gain some market share this year and do better than the industry".

On the outlook for the festive season, he said, "Our expectation is that the production will again pick up from August onwards and we expect a strong festive season. In fact we expect the industry to grow in the balance nine months in double digits and overall for the year the industry may show single-digit growth for the year."

While July and August are usually softer months from a demand perspective, he said the company wanted to build up production "only to catch the festive season".

"Normally we build up the inventory during these months to catch the festive season," Madan said.

Escorts Ltd has three main verticals -- agri machinery, construction equipment and railway equipment division. The agri machinery segment posted revenue of Rs 953.5 crore in the quarter ended June 2020 as against Rs 1,092.0 crore in the corresponding period last fiscal.

While the construction equipment division revenue was down at Rs 52.5 crore in the quarter as against Rs 212.2 crore in the year-ago period. Revenue for the quarter was at Rs 54.9 crore as against Rs 118.1 crore in the same quarter last fiscal.